Auditor-general Tsakani Maluleke has sounded an alarm at the persistent trend of poor financial performance of municipalities across the country.
Releasing the 2023/24 audit outcomes in parliament, Maluleke said that despite her continued calls for both national and provincial governments to intervene at local government, municipalities were still receiving poor audit outcomes.
This comes after only 41 out of 257 municipalities across the country received clean audits.
Of the eight metropolitan municipalities only the City of Cape Town received a clean audit.
This was despite municipalities spending R1.47bn on hiring consultants to help them compile their financial statements with 103 municipalities submitting statements riddled with rudimentary errors.
Maluleke said that while 59 municipalities had improved their audit outcomes since the 2020/21 financial year, 40 had since regressed.
“While the audit opinion on the financial statements of these municipalities may be unqualified, meaning their published financial statements are credible; the material findings on performance information mean that their performance reports are not credible; while the material findings on compliance signal continued disregard for legislation or significant lapses in control,” said Maluleke.
According to Maluleke, 99 municipalities obtained unqualified audit opinions with findings on performance information as well as on compliance. However, this was not to be celebrated as they could lose their unqualified status if they do not speedily deal with the challenges she has raised.
Of these 99 municipalities, 71 had failed to submit quality financial statements and had relied on her audit process to correct the errors identified by the auditors.
City of Johannesburg did not give us quality financial statements when we began our audits. Now that's a big city, the biggest in our country, the biggest on the continent, there should be no difficulty in ensuring that you've got the skills and the capability to do what you're supposed to do.
— Tsakani Maluleke, auditor-general
Maluleke was particularly concerned about the performance of the metropolitan municipalities. She said over and above the City of Cape Town being the only metro to receive a clean audit, four of them had received unqualified audit opinions, with some having failed to submit quality financial statements.
Maluleke said it was concerning that the metros, which are allocated a substantial chunk of the budget, were failing to attract quality people in their finance departments to assist in compiling adequate financial statements.
“The eight metros across the country look after half of the expenditure budget for local government, they look after service delivery that affects 46% of households across the country. Their budgets are quite significant, they sit in the centres of economic activity,” said Maluleke.
“They should have no difficulty attracting the skills that they need to run their environments. Unfortunately, out of the eight we've got only one clean audit which is the City of Cape Town.”
City of Johannesburg, City of Ekurhuleni and City of eThekwini received an unqualified audit opinion.
“Of those, only the City of Ekurhuleni gave us quality financial statements when we started the audit ... and eThekwini. These two gave us quality financial statements ... meaning their ability to compile financial statements is quite strong,” said Maluleke.
Maluleke bemoaned the quality of the financial statements that were submitted by the City of Johannesburg.
“City of Johannesburg did not give us quality financial statements when we began our audits. Now that's a big city, the biggest in our country, the biggest on the continent, there should be no difficulty in ensuring that you've got the skills and the capability to do what you're supposed to do,” she said.
“The ones in the yellow zone also struggled with performance information. So eThekwini and City of Johannesburg struggled with giving us credible performance information, Ekurhuleni didn't, they've got good performance information.”
She said there was insufficient attention being paid to addressing the weaknesses in the quality of financial management, performances, compliance and its negative impact on citizens.
Maluleke said she was concerned that despite her discussions with national and provincial governments, including ministers and premiers, about intervening in struggling municipalities, there was still no significant improvement.
“Despite the commitments made in response to these calls, action has been too slow and has had little impact on the lived realities of South Africans,” she said.
“Failure at municipal level has a direct and significant impact across South African cities and towns. Residents and businesses face regular disruptions in service delivery and have to contend with water leaks, potholes and filth in their streets.”
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